SOCIAL SECURITY PENSIONS BILL

HL Deb 24 June 1975 vol 361 cc1324-74

4.49 p.m.

Lord WELLS-PESTELL

My Lords, I beg to move that this Bill be now read a second time. This is the third major Bill to reform retirement pensions to be presented to Parliament in the last six years. The first, which was associated with the name of the late Richard Crossman, failed to complete its passage in another place and never reached your Lordships' House. The second, with which the noble Lord, Lord Aberdare, was associated when he was on the Government Benches, became the Social Security Act 1973. Speaking personally, I am delighted that the noble Lord will be taking part in the passage of this Bill because we welcome his skill and experience.

I am glad to be able to commend a Bill which comes to your Lordships' House after an unopposed passage through another place, during which the constructive approach of the Opposition led to a number of improvements. It is extremely important to achieve and keep a consensus on these matters and we know that the pension interests are entirely with us in this aim. Again, if I may say so without being invidious, I am glad that the noble Lords, Lord Byers and Lord Banks, both of whom have considerable expertise in this subject, will be giving us the benefit of their experience.

The Bill is based on the Government's White Paper, Better Pensions, published last September. Though it is relatively simple in concept, its details are complex—particularly as it amends, rather than replaces, existing legislation. That legislation was recently consolidated into the Social Security Act 1975, and it is that Act which the Bill refers to as "the principal Act ". Much of the basic framework of the 1975 Act, and in particular the system of earnings-related contributions introduced in April of this year, remains essentially unchanged, but the Bill introduces earnings-related pensions in place of the mainly flat-rate benefits which have been traditional in our concept of national insurance.

The scheme introduced by the Bill is essentially a partnership between, on the one hand, the State pension for retirement pensioners, and on the other, occupational pensions schemes. Let me deal first with the provision for those people—still a majority of workers—who are outside good occupational schemes and who look for their pension cover entirely to the State scheme. The benefits on retirement, widowhood and invalidity, will be linked to the contributor's previous earnings. They will be in two parts—a basic component and an additional component. The basic component will represent a pound for pound replacement of the first £11.60 of earnings in present day terms. As your Lordships will know only too well, £11.60 is the level of the current fiat-rate pension.

The basic component of the new scheme will be the flat-rate pension in force when the scheme starts. The additional component will represent 1¼ per cent. of earnings above £11.60 and up to a ceiling of seven times that figure—in excess of £80 a week in 1975 terms—for each year of contributions to the new scheme. The figure of 1¼ per cent. may sound unfamiliar, but in fact it is equivalent to the "eightieths of salary per year of service "which is a common formula in occupational pension schemes of the "final salary" type, and which is embodied in the conditions for contracting out.

After the scheme has been in operation for 20 years, the additional component will represent a 25 per cent. return on the band of earnings between the lower earnings limit and the ceiling of just over £80 which I have just mentioned. Thereafter, there will be no addition to the figure of 25 per cent. but that percentage will be based on the relevant earnings in the contributor's best 20 years. One major feature of the scheme is its protection of pensions against the ravages of inflation. The actual earnings on which pensions will be calculated will be revalued in terms of the general earnings levels current in the last complete tax year of the contributor's working life. This revaluation will be carried out before the best 20 years are selected. Once a pension is in payment it will be reviewed at least annually, and the basic component uprated in line with the movement of earnings or prices—which-ever is more favourable to the pensioner. This follows the statutory provision which the Government have introduced for up- rating the present flat-rate pension. The additional component will be uprated in line with prices. I want to emphasise that. Graduated retirement benefit which is in payment under the scheme introduced by the Lord Boyd-Carpenter in 1961, together with the rights to graduated benefit of those who have not yet retired, will also be protected against increases in prices.

The Bill was presented in another place by my right honourable friend the Secretary of State for Social Services and it has appropriately been called a women's charter. It embodies a new deal for women, consistent with the Government's overall policy of bringing sex discrimination to an end. On the basis that women should assume equal responsibilities in return for receiving equal rights, there can be no place for a married women's contribution option in the new scheme. The present arrangements encourage the idea of women as dependants of their husbands who—irrespective of their own employment history—can be adequately provided for at a lower level than men and single women. The Government believe that that is wrong and that working wives and widows should be encouraged to earn full benefits in their own right by paying full contributions.

Last October, the Government sought the views of various organisations representing the interests of employees, employers and women in general (including the TUC, the CBI and the Women's National Commission) as to the principle of abolishing the option and the best way of bringing it to an end. These consultations revealed substantial agreement that the option should be withdrawn but differing views on the way in which existing rights should be phased out. The Bill now before your Lordships therefore removes the option as a permanent provision of the national insurance scheme but contains wide regulation-making powers to accommodate whatever way of phasing out the option is finally chosen.

As your Lordships may know, the Government undertook to publish their views on the use of the regulatory powers, so that organisations could comment before final decisions were taken. A Memorandum, copies of which were placed in the Library, was sent to interested organisations and they were asked for their further views and comments by Friday last. The Government are now giving careful consideration to the comments which have been received before taking decisions on the way in which the regulation-making powers in Clause 3 of the Bill should be used. These regulations when presented will have to be approved by Affirmative Resolution of each House, so there will be ample opportunity for your Lordships to consider the matter in detail.

Apart from these transitional matters, women will from the start of the scheme pay the same rate of contributions as men with the same earnings and qualify for the same rate of benefit. Discriminatory rates of short-term benefits, and special rules such as the "half-test", will pass into history. However, the pension which a woman can receive on her husband's contributions will remain, principally as a fall-back right for those who do not stay in paid employment for long enough to earn a full basic component on their own record of payments. A women entitled to benefit on both her own contributions and her husband's will be able to draw the larger of the two basic pensions and will, in either case, be entitled to any additional component which she herself has earned. On retirement a widow will be able to draw both her own earnings-related pension and that to which she is entitled by virtue of her husband's contributions, although she will not be able to receive more than one basic component which, as I have already stated, is £11.60 at present; nor will she be entitled to draw more in total than the maximum pension payable under the scheme to one contributor.

Although it is somewhat overshadowed by the improvements for women, the Bill also extends pension cover for men, in that it introduces the concept of a widower's pension on his late wife's contributions. Where the wife in a pensioner couple dies, the widower will be able to inherit her pension entitlement, subject to the same limits and the same maximum as I have described as applying to widows. Also, a man of working age who is ill when his wife dies, or who falls ill shortly after her death, and who qualifies for invalidity pension because his incapacity has lasted six months or more, may have this calculated on his wife's record, if her record is better than his own.

Another new concept introduced by the Bill, which will primarily be of help to women but will certainly also benefit some men, is that of recognising home responsibilities. The Bill ensures that a person who stays at home to bring up children or care for a sick or elderly relative, will have his or her pension rights safeguarded. Though it will be necessary for a person to contribute for twenty years in order to qualify for a full pension, this provision means that a woman may spend as much as half her adult life away from work coping with her family responsibilities without jeopardising her right to a pension based on twenty years' earnings. Exactly how these arrangements will work, and the details of the circumstances in which pension rights will he protected by reference to home responsibility, will be set out in regulations which will come before your Lordships in due course. This is another matter on which your Lordships will be able to consider the details. In addition to the improved earnings-related invalidity pensions payable to disabled workers, the conditions for receipt of invalidity allowance, which depends on the age at which the pensioner becomes incapable of work, are eased. The maximum rate will become available to men and women who fall sick before age forty, and thus will not generally have been able to pay the twenty years' contributions necessary for a full pension under the new scheme.

My Lords, before I leave the subject of the provision made in this Bill for the chronically sick and disabled, I want to speak for a few minutes about a new benefit which was added to the provisions of the Bill before it left another place, and was welcomed there by both sides of the House. I refer to the mobility allowance. The broad outlines of this new benefit were announced in a Government Statement on 13th September last year, but the further detailed work necessary meant that it was not possible to table legislation until the Report stage of the Pensions Bill in another place. There is no very obvious consanguinity between the mobility allowance and the neighbouring provisions in the Pensions Bill, but the aim has been to seek legislation on a timetable which will make it possible for the new benefit to begin to come into operation in January 1976, which is almost on us. The Pensions Bill represented the only opportunity of achieving this. Given the nature of the allowance, and the solid reasons for introducing legislation now, I am confident that your Lordships will consider that this was the right way of proceeding.

The genesis of the mobility allowance goes back to the considerations which followed the publication last year of the report Mobility of Physically Disabled People produced by the noble Baroness, Lady Sharp. The views expressed by interested bodies and Ministers' own feelings about the best way of making progress led to the conclusion that the primary emphasis in mobility help should be not on hardware, but on cash—cash providing a greater degree of flexibility, and enabling provision to be made for those people unable to walk, who were neither able nor willing to drive a car themselves, nor had anyone readily available to drive it for them. It is perhaps natural, given the origins of the vehicle service, and given the fact that it has hitherto stood alone, that interest should have been focused chiefly on the disabled driver. However, mobility problems are much wider than this, and any solution which was focused solely on hardware and solely on the disabled driver would be only a very partial solution, and not altogether a satisfactory or fair one.

The mobility allowance provided for in the Bill now before us is a £5 a week taxable allowance for disabled people of working age and children aged five or over who are unable, or virtually unable, to walk. Many of your Lordships will recall that the September Government Statement envisaged an allowance of £4, and a substantial improvement has therefore been made between the announcement and the presentation of legislation. For those who qualify for the allowance, the three-wheeled invalid vehicle will continue to be available as an alternative. More important, however, the allowance will be available to perhaps 100,000 severely disabled adults and children for whom the existing vehicle arrangements provide no help whatever and can, by their nature, provide no help. In the present difficult situation, mobility allow- ance marks a very real and very important advance in our view, and although I recognise that criticisms have been, and no doubt will be made, regarding the limitations on what has been done, I am very happy to commend the Government's proposals to your Lordships for the very great deal that they achieve.

My Lords, I shall now return to the main structure of the Pensions Bill, and say something about the cost of these proposals, and how they are to be paid for. Even without any of the improvements which the Bill contains, the cost of the national insurance scheme is now running at about £6,500 million a year, some five-sixths of which is financed by contribution income and the remainder by a subvention from general taxation.

The contribution rates which came into force in April represented 14 per cent. of the earnings of employees up to the scheme's upper limit, divided so that the employee himself pays 5½ per cent., and his employer pays 8½ per cent. The Bill, as your Lordships will see from the Explanatory and Financial Memorandum on the front of it, provides for these contributions to go up by 1 per cent. for employees and 1½ per cent. for employers; in other words, to 6½ per cent. and 10 per cent. respectively. However, those figures are provisional, and Clause 2 of the Bill requires the Secretary of State to review them and to report back to Parliament before the scheme comes into force. The Government's intention is that the initial rate of contribution should be at a level which will keep the scheme's finances in balance for a number of years, but the Government Actuary's forecasts suggest that its emerging cost will mean a contribution increase of ½ per cent. after 10 or 15 years and that, by the time it has been in operation for 30 years, a joint contribution rate of between 18 per cent. and 18½ per cent. will be required.

By that time, as the Memorandum on the front of the Bill indicates, the cost of National Insurance will have risen, in 1975 terms, from £6,500 million to between £8,500 and £9,000 million a year. This increase in expenditure is a measure of the extent to which the Bill will improve the living standards of the retired, the widowed and the sick. There will, as a result, be savings in supplementary benefit which will be achieved as the number of people who need supplementary benefit because they cannot at present manage on their contributory pensions steadily falls.

So far I have described the new contributions and benefits solely as they will affect people who are primarily dependent on the State for their pension provision. But a crucial feature of the new scheme as I explaned in my opening remarks, is a new concept entirely—the concept of a partnership which it brings about between the State and good occupational schemes. This brings me to the feature of the Bill which has given rise to the greatest amount of comment, both in another place and in the Press; namely, the facility which it contains for contracting out of part of the State scheme for those who are members of good occupational schemes, though I should make it clear that much of the State provision, such as full cover for earnings-related invalidity pension, partial cover for widowhood, and the State's guarantee of price-protection, will be available to the contracted-out, even though they look to an employer's scheme as their primary source of personal retirement pension. I hope I am right about that.

The Bill provides that it should be open to employers with good occupational pension schemes to contract their members out of the full State scheme and thereby to take over responsibility for a part of the pension that would otherwise be provided by the State. In return, both the employer and the employees concerned will receive a reduction in their contributions to the State scheme. The conditions for contracting-out are based upon two principles: first, that occupational schemes should not be asked to do something which, by their nature, it is not possible for them to do; and second, that the position of the individual pensioners should be safeguarded by providing that they should be no worse off on account of contracting-out. As a result of this approach a large measure of agreement was reached over the contracting-out provisions in another place. I am confident that in this House there will be a similar constructive approach to the Bill, and I turn now to the general outline of the contracting-out provisions.

There will be no provision for contracting-out of the State pension scheme on the lowest band of earnings (the slat rate pension of £11½60 in the Bill), which count towards the basic component, but employers will be able to contract out of the additional component which is based on earnings between £11½60 and the scheme's upper earnings limit of just over £80 a week. The two main conditions that an occupational pension scheme will have to satisfy in order to contract out are, first, that it must provide personal pensions, based on final salary or average salary revalued in line with the growth of earnings generally, available not later than age 65 for men and 60 for women, with an annual accrual rate equivalent to at least 1/80th of pensionable salary—which equals the 1¼ per cent. accrual rate to which I have already referred. For widows a pension must be provided equal to at least half of the husband's pension at the time of his death. Secondly, the pension of each scheme member must be not less than a minimum—known as the guaranteed minimum pension—at least equal to the pension he has forgone in the State scheme. For widows the scheme must provide a guaranteed minimum of at least half the husband's guaranteed minimum pension at the time of his death. I should add that in calculating the guaranteed minimum, occupational schemes are not being asked to match the "best 20 years" provision. Liability for that will remain with the State scheme.

Where members leave a contracted-out scheme after less than five years of contracted-out service, or where a scheme ceases to be contracted-out or has to be wound up, there are arrangements for the scheme to reinstate—or "buy back"—members into full State pension entitlement by means of the payment of a premium to the State scheme. Whether or not a scheme can be contracted-out will he a matter for determination by the Occupational Pensions Board set up under the Social Security Act 1973, and the Board will also exercise supervision over the funding and solvency of contracted-out schemes.

Both members of contracted-out pension schemes and their employers will pay a reduced contribution to the State scheme on the upper band of earnings. The Government's White Paper proposed that the reduction should be 6½ per cent., which was the neutral figure set by the Government Actuary. However, in recognition of the risks that employers would be taking, and on which the occupational pensions interests have laid great emphasis, the Government decided that the reduction should be increased to 7 per cent. This was one of the concessions made during the period between the publication of the White Paper and the publication of the Bill.

After the publication of the White Paper, representations were made to the Government about the requirement on employers to revalue the guaranteed minimum pensions of early leavers in line with the general movement in earnings. The requirement was to ensure that when the early leaver reached pensionable age, his contracted-out preserved pension would not have lost its value in relation to the pension which he would have received from the State had he not been contracted-out. However, comments made suggested that employers would be discouraged from contracting-out unless they could know what their commitments for early leavers were at the time they left. A variety of proposals was put to the Government for limiting the commitment of employers to revalue pension rights for early leavers. The Government came to the view that of the proposals put to them the most satisfactory was that which now appears in the Bill; that is, to give schemes the option of choosing to limit revaluation for their early leavers to 5 per cent. per annum and to pay a premium to the State scheme at the time of leaving, in return for which the State scheme would take over the balance of revaluation over 5 per cent.

Noble Lords may also be aware that pensions interests have been greatly concerned about what has been termed the open-ended commitment that would be undertaken by contracted-out employers who would have to revalue guaranteed minimum pensions in line with the general movement in earnings, since there would be a requirement to pay State scheme premiums where a scheme ceased to contract-out on the basis of this open-ended revaluation. The Government accepted that the Bill needed to be amended on this point and changes were accordingly made to the Bill at the Report stage in another place. The result is that when a scheme ceases to be contracted-out, an employer may elect to pay a premium on the basis that for each of the last five years the accrued rights had been based upon revaluation at a fixed rate of 12 per cent. The effect is that employers will know the maximum extent of their commitments for a period of up to five years ahead, and the immediate effect of an upsurge of earnings on the employer's liability in respect of guaranteed minimum pensions will be limited. The Government also agreed that the premium tables will vary according to the yield on investments. This will assist schemes which have to realise long-term investments at perhaps an unfavourable time in order to pay "buy back" premiums to the State scheme.

My Lords, I hope I have said enough to give the House a general idea of the scope and provisions of this important Bill. Part I of the Bill relates to contributions. Part II sets out the earnings-related benefits which the State will provide and also the new mobility allowance. Part III deals with contracting out. Part IV deals with the right of women at work to enjoy the same access to occupational schemes as their male colleagues. Finally, Part V of the Bill is general and technical and contains, for example, the power to make rules governing the transition from the present scheme to the new one. It also empowers the Secretary of State to make Appointed Day orders bringing the pensions scheme into force. The Government's intention is that it should come into operation no later than 1978. The possibility of a 1977 start is under examination, but there are very considerable difficulties in the way of this and it would be wrong to be too optimistic about it. I do not think I can go further than that at present. A firm decision about the starting date will be announced in the autumn. As I said earlier, the Government are proposing a different timetable for the mobility allowance, which will begin to be phased in from January 1976.

The Social Security Pensions Bill is about partnership. Partnership between good occupational schemes, which will be helped by a contribution reduction to continue to provide the socially and economically valuable service which they already offer the community, and the national insurance scheme, which will offer those without occupational cover a State pension which bears comparison with the best the private sector can provide. Partnership between the generations, in that higher contributions by the working population will go to finance a steadily increasing standard of living for old people, and will bring to an end the situation in which millions of workers have to look forward to retirement in terms of an inadequate pension topped up by means-tested supplementary benefit. Partnership between men and women, exemplified not only by their equal status in the national scheme but by the improved range of benefits which will be available to the survivor of a marriage who has to cope in retirement or sickness on his or her own. And, finally, partnership between the more fortunate members of society who retain their health and faculties, and the sick or disabled people for whom the improved invalidity pension and the mobility allowance are being provided.

I am sure your Lordships will welcome this Bill. It is with confident expectation, if I may say so, of support from all sides of the House that I bring this Bill to your Lordships for consideration and ultimately for your acceptance. I apologise for speaking so long. This is a complex and involved Bill and I do not think that I could have shortened my speech any more than I have done. I beg to move that this Bill be now read a second time.

Moved, That the Bill be now read 2^a—(Lord Wells-Pestell.)

5.38 p.m.

Lord ABERDARE

My Lords, I think that we all will be grateful to the noble Lord for having explained this very complicated measure with great clarity and obviously with a great grasp of the very many intricate proposals contained in the Bill. I had the privilege of introducing the 1973 Act in your Lordships' House, and I can only say how sorry I am that after such a comparatively short period it is being replaced by another Bill. I only hope that Lord Wells-Pestell's Bill—if I may so call it for the moment—has a longer life than that Act.

My Lords, the recent Parliamentary history of pensions legislation is really deplorable. The National Superannuation Insurance Bill associated with the name of Richard Crossman fell in 1970. Then we introduced our own 1973 Bill, which for the first time contained provisions for earnings-related contributions for a flat rate pension and a reserve scheme, on a funded basis to provide an earnings-related second pension for those who were not in occupational pension schemes. Then, with the election of the Labour Government in 1974, the implementation of part of our Act was dropped and the present Bill has now been brought before your Lordships. The situation was becoming somewhat ridiculous, with one Government reversing the previous one's plans, to the utter confusion of those people who tried their best to provide occupational pension schemes.

One thing that is of paramount importance in the pensions industry is stability over a long period—which is just what we were not providing. It is hopeless if on coming into Office every Government change the rules of the game so that only the pensioners suffer. For that reason we took the view that we should do our utmost to co-operate with the Government on the Bill. We wanted an agreed Bill, provided we were satisfied that it allowed for a viable partnership between State and private pension schemes. That has been the main objective of my colleagues in another place. We now have a Bill which is largely supported by all the Parties.

I believe that I am entitled to take credit for the attitude which we have shown. We should have far preferred to retain our 1973 Act, to build on it and to develop from it. Indeed, we still have some reservations about this legislation. But, given the fact that the new Bill is now before us, we can claim to have co-operated with the Government in what we concede to be a matter of national interest. Naturally, I give credit also to the Government for their willingness to listen to our arguments and to make concessions on some points which we have produced. I hope that this area of co-operation will continue in this House. I assure the noble Lord, Lord Wells-Pestell, that our attitude will be as he requested—as constructive as we can make it.

In our Act we were just as anxious to provide a satisfactory and lasting scheme for pensions. But I think we were more influenced by problems of resource allocation and the determination of priorities. There tends to be a different approach between the Labour Party and ourselves on those issues. The Party opposite often take the view that people have a right to certain benefits and that, therefore, we must find the money to finance them. We tend to take the view that we should maximise our financial profitability in order to maximise our social benefits. But, in the end, we can pay out in benefit no more than we earn, and we then have to take priority decisions to make choices between what we can afford.

Of course, pensioners are a most deserving section of the community. No one would wish to deny that, certainly not in your Lordships' House! But there are others—children, the sick, the disabled, the disadvantaged, and with limited resources it is the Government's duty to make choices in allocating their funds to the various needs of their citizens. These considerations led us to lay great stress on the importance of funded occupational schemes and a funded reserve scheme. Under our Act, the second pension was to be provided out of real savings, not out of current contributions. The Government's proposals, for what is called "the additional component ", is on a pay-as-you-go basis. It is not funded, but is paid for out of current contributions and by taxation. Moreover, the Government have assumed expensive liabilities to pensioners in the provisions to revalue pensions in line with inflation. The net effect is a large allocation of public resources to pensioners, and therefore much less room for manoeuvre within the limits of public expenditure for meeting the needs of other groups.

Certainly we welcome the new mobility allowance, but that has not satisfied everybody. I see that the noble Baroness, Lady D'Arcy de Knayth, will be speaking later. I have no doubt she will make some positive comments on the subject. But my noble friend Lord Sandys who is speaking at the end of the debate will deal more thoroughly with the provisions for the disabled. My main point of substance is that the more public expenditure is devoted to meeting the needs of the pensioner, the less is available for other groups in need. The noble Lord, Lord Wells-Pestell, referred to some of the huge figures involved in the National Insurance Fund. He told us of the primary contribution of 16½ per cent. and how this would rise over the years as the scheme matured.

Moreover, there is essentially a good deal of uncertainty over calculations of the future finances of the National Insurance Fund. So much depends on the assumptions made by the Government Actuary in arriving at his figures. For example, in the case of this Bill the Government Actuary's assumptions include a rate of unemployment of 2½ per cent.—that is, about 575,000. Certainly we know, unfortunately, that that is an underestimate at present. It is also disclosed that for every 100,000 more unemployed the Fund has to find another £115 million, or it is that much worse off for lack of contributions and for paying out more benefits, while in addition another £60 million has to be found in supplementary benefit for every 100,000 unemployed.

In subsequent estimates in connection with the Social Security Benefits Up-rating Order 1975 more realistic assumptions have been made. An unemployment figure of 850,000 is used. This has resulted in that later estimate of an overall deficit of £368 million in the Fund for 1975–76. I cannot help having some apprehensions, therefore, about the burden which we are placing on the working population of the future, at a time when we have a growing percentage of old people in the population and declining birthrate. But the situation will be much worse if the Bill results in a reluctance by employers to contract out.

We made it a first priority of our 1973 Act to encourage the growth of occupational schemes. The fact that they are fully funded means that they represent real savings and provide funds that are badly needed for investment. Usually, they provide better benefits than a State scheme and are certatinly more flexible in gearing their benefits to the needs of a particular industry or locality. We had high hopes of success. No one did more that the noble Lord, Lord Byers, to promote occupational schemes in industry.

We now face a different situation. Many existing pension schemes are enjoying—if that is the right word—a negative rate of return. The rate of return on their investments is insufficient to meet their outgoings. I know we all hope that this is but a temporary situation. However, the whole concept of partnership with the occupational pension industry in this Bill will depend on a rate of return on investments that exceeds the rate of earnings increase over the long term. That means that the Government's whole economic policy is involved.

Much of the Bill's success will depend on the level of contracting out. There still remain areas of concern to those involved with occupational schemes in the pensions industry. I grant that the Government have made some useful concessions, which the noble Lord mentioned, especially in respect of early leavers, those who quit a scheme before reaching pensionable age; whereas the Bill says that rather than the employer preserving the pension and keeping it proof against inflation, he may choose to limit his uprating to 5 per cent. per annum and leave the balance to the State on payment of a premium. The anxieties of the pensions industry surround the amount of that premium.

The noble Lord also told us of the case of a contracted out scheme that can no longer afford to contract out or which is wound up. In such case again a premium is payable to the State in respect of those who are either in receipt of a pension or who have accrued rights towards one. Again it is the amount of that premium that gives rise to anxiety. I am sure it will be well appreciated that it is of the essence of a funded pension scheme that it is able to calculate its risks with some considerable accuracy. An unknown commitment to pay a premium on some future occasion poses an insuperable problem to an actuary who has to work on known or at least assumed figures.

I concede at once that the Government have made a concession in respect of the calculation of any such premium, in that the employer can calculate his revaluation on the basis that earnings have risen by 12 per cent. per annum in the preceding five years, as the noble Lord told us, and that the calculation of the premium will take account of current market yields. But, as I have said already, many pension schemes are in difficulties. The rate of wage increases on which occupational pensions are mostly calculated is greater than the return on the pension scheme's investments. In simple terms, they are trading at a loss, and unless inflation is curbed and profitability restored to industry and commerce, the whole structure of occupational pensions will be destroyed. No one takes such a gloomy view, but the Government must act quickly to restrain wage increases, to raise the profitability of industry and to reduce inflation. Employers at present are considering contracting out, and they are faced still with many doubts and difficulties. If the Government genuinely want to make a success of a partnership with the occupational pensions industry, they have to remove these doubts. To do them justice, they have shown the willingness to do so in another place; I hope that we shall see some further steps taken in the course of this Bill through this House.

5.52 p.m.

Lord BYERS

My Lords, I will naturally follow fairly closely the noble Lord, Lord Aberdare, who has just spoken, but first I think it only right at this stage to declare an interest, if only an indirect one. As your Lordships may know, I am chairman of the Company Pensions Information Centre which was set up in 1973 to bring to the notice of employers their statutory obligations under the 1973 Act. I was glad to have the assistance of the noble Lord, Lord Aberdare, when we first went into the campaign. The Centre now provides advice on and stimulates interest in occupational pensions matters, and that is why I say this is an indirect interest. Although the Centre is financed by a number of insurance companies, it is not concerned with promoting any specific scheme or any particular type of scheme. It is concerned to see the maximum number of people enjoy good occupational pensions of any type and from any quarter.

Having said that, I want to say at the outset that, despite the delay which occurred from the scrapping of much of the 1973 Act, I welcome what has been done since then. Particularly I welcome the steadfast adherence of the Secretary of State to the concept that the best form of pensions provision in the future will be through a close partnership between State provision and good occupational schemes. I should also like to pay tribute to Mr. Brian O'Malley, the Minister of State, and the staff at the Department of Health and Social Security, for the close and sympathetic consultation in which they have engaged at all stages of this measure. To me, as an old Parliamentarian, it has been a pleasure to see the way this job has been tackled. I also want to pay tribute to all those who have made a sincere effort to raise pensions above Party politics, and particularly the attitude of the official Opposition has been extremely helpful in this matter. All of us recognise, as the noble Lord, Lord Aberdare, said, that the way we politicians were carrying on was intolerable from the point of view of the future pensioner, and many years were wasted as a result of the changes which took place.

If we can carry through this all-Party, all-interest agreement to Royal Assent, it will represent an historic landmark in pensions legislation in this country, and something of which we can all feel proud. As a result of all this consultation, the Bill has been much improved since the White Paper was produced. For those of us who want to see the maximum number of people included in good and viable occupational schemes, the major test at this stage and over the next few months is whether in our judgment the terms for contracting out of the State earnings-related scheme in favour of going into a good occupational scheme are attractive enough to ensure that the vast majority of employers will wish to do so and, probably equally important, that those people whom employers consult on these matters can, with a clear conscience, advise them to do so. This is a matter of judgment; it is not a matter en which the Government, the political Parties or the industry are opposed to one another in principle.

The Government have often stated their desire to see as many people as possible in good occupational schemes in both the public and the private sector, not only because these schemes can provide better and more flexible benefits, but also, as the noble Lord, Lord Aberdare, said, as a matter of public policy to ensure that adequate funds are available for industry and, I would add, that the already heavy burden on the State of the "pay as you go" system is kept at a tolerable level. So it is a matter of judgment.

In order to gauge whether the Bill contains the necessary incentives for the employer to contract out, we have to look at a number of factors. The first and possibly the overriding factor is the state of the economy and the rate of inflation at the time when the decision has to be made. I should not like to have to make that decision this week. This is not just a matter of pensions; it affects all major business decisions, of which pensions and the future of pensions is only one. In my view the rate of inflation simply has to be brought down smartly in the next 12 months, and the sooner we start this the better. If employers do not feel confident that this rate of inflation will be brought under control, the natural tendency will be to elect for the "pay as you go" basis and the inflation proofing of the State scheme, but without the flexibility which the occupational scheme can offer.

Secondly, the Government would be wise to see what further steps they can take to cut down the uncertainty which makes employers hesitate to contract out. This means that much will depend on what further assurances the Government can give in this House on what have become known as the open-ended commitments. In the main, these fall into three categories: the liabilities in respect of those who leave service; the liabilities in respect of a scheme which ceases to contract out; and the liabilities of a scheme which is wound up and whose members are brought back into the State scheme.

It is not my intention to rehearse the very technical arguments put forward in the other place and elsewhere on these three matters. On the other hand, I do have the advantage of hearing a wide range of views from many different people, and I am at the moment concerned at the views which I hear have been expressed over the past few weeks, even among those who have good occupational schemes, that contracting out was not an attractive proposition. I am hoping the concessions, the improvements, which the Government have made in the Report stage in another place may alter this to some extent, but at the moment, when they balance these improvements against the inflation in the economy, they are not showing any attraction to contracting out, and that worries me.

We have to remember that it is the employers and not the pensions industry who make the final decision as to whether or not to contract out. For those who already have good pensions schemes it is important that the contracting out terms should be attractive if the Government's offer of partnership is to become effective. If those with good pension schemes are deterred from contracting out, then one has to look at the alternatives; and the alternatives are very complex. The occupational scheme is unlikely to be discontinued completely, but it is not easy to modify a scheme to "live on top" of the new earnings-related State scheme, if one decides not to contract out totally. The problem is that under such an earnings-related scheme the benefits depend not just on the earnings together with the number of years the beneficiary has been in the scheme, but also on changes in the national average earnings. That is further complicated, because the band of earnings is itself a moving one.

I am not saying that these complexities rule out having an occupational scheme "living on top" of the earnings-related one. But it is clear that the complexities themselves will discourage many employers from going very far along this road. Therefore, there is every reason for giving them a positive incentive to contract out and do a clean job.

One further consideration is that if the existing occupational scheme is a good one, then "living on top" will almost certainly involve cutting back benefits at some stage. This will not be popular and it will not be easy to demonstrate the fairness of any particular reduction in benefits which may have to be undertaken.

If there is one thing of which my acquaintance with pensions has convinced me, it is the need to keep things as simple as possible so that the schemes can be understood and appreciated by the members and not just by those who are experts on pension matters. Cutting back benefits will not be popular and it will not be easy to demonstrate the equity of such an action. Therefore, as to contracting out itself, the terms at the moment are finely balanced. But we have to ask: is it enough for them to be finely balanced? Should there not be a positive incentive given to employers with good schemes to contract out and to make that their final decision?

There is more to contracting out than just having a good scheme. A prudent employer always has to bear in mind that his business can run into trouble and he may not always be able to maintain a scheme of the required standard. If that happens, as the noble Lord, Lord Wells-Pestell, explained, he may have to buy his way back into the State scheme. If that problem arises, it will need some time to resolve because, apart from the technical considerations, provision has rightly been made for comprehensive consultation.

That is absolutely right; but the employer needs adequate notice, therefore, of any worsening in the actuarial basis of the buy-back terms, because he is not going to be able to decide that he will buy back into the State scheme on, say, a Tuesday morning. This will be a long and, rightly, a comprehensive problem. The second fear on the part of the employer arises when people cease to be contracted out for one reason or another, including leaving before retirement age. The Bill provides alternatives, but those alternatives are still, in my view, open-ended and therefore lend themselves to the criticism that they involve uncertainty which can affect an employer's decision.

I spoke earlier of the widespread views I encounter about the anxieties of employers over this Bill. Here I might mention the starting date. I was delighted, if I may say so, at what the noble Lord, Lord Wells-Pestell, said, because this problem of the starting date—1977 or 1978?—has to be seen in perspective. A year ago I was very much in favour of pressing on and getting the earliest possible date. But the problems for funded schemes are more acute than they have ever been. Pension schemes are badly hit by inflation. Scales of pay and, hence, pensions based upon them, are increasing the liabilities of pension funds at a rate which is outstripping the yields which those funds can get on their assets. This is worrying many of them and the position is made worse, for instance, by such policies as dividend limitation.

This is something which has to be taken into consideration when dealing with this problem of funding schemes. In other words, there is a negative yield on the funds, as the noble Lord, Lord Aberdare, said. Even the best ones are suffering from this, and it is the biggest stumbling block to an effective partnership between the State and private schemes. It will take some time to reverse this trend, and that points, in my mind, to 1978 rather than 1977. Secondly, I do not think we should press employers to reach a decision on the complex issue of contracting out in too short a time. I am hoping that we shall get an improvement in the economy which will make it easier for them to decide to take the action which I should like to see them take.

Finally, the supply of pensions expertise is very limited in this country. The degree and the extent of interest in pensions by the ultimate consumer—the scheme member is higher than ever before, and this is particularly true of the trade union movement, where they are really taking a great interest in pension schemes. This is something which I very much value. The emphasis placed on consultation before the final decision is reached is very great, and it is right that this should be so. Therefore, we should remember that the question of contracting out involves a decision for every single employer, and I am very doubtful whether negotiation and consultation on a measure of such complexity can be completed on such a wide scale by April 1977. If the price of fuller consultation and more informed decisions is a further period of one year, then I believe we ought to accept it. I hope that in this House we can further improve the Bill by the next stage and that, having done so, we can be confident that we have a structure which will endure for a very long time.

6.7 p.m.

Baroness D'ARCY DE KNAYTH

My Lords, I shall deal with only one clause in this Bill today, although at Committee stage my noble friend Lord Crawshaw and I shall doubtless be pursuing the question of the earnings "stop" for invalidity pensioners. The Minister will remember the emphatic defeat suf- fered by the Government during the Committee stage of the Social Security Benefits Bill last March, although the Amendment involved was subsequently removed in another place and nothing appears to have been done since then. I should, however, like to welcome some improvement for the invalidity pensioner with an earnings-related pension and the relaxation of the age criterion for the invalidity allowance, which was mentioned by the noble Lord today.

For the moment I shall deal only with Clause 22, the mobility allowance, already roughly outlined by the noble Lord, Lord Wells-Pestell. I agree whole-heartedly with him that it is a very welcome and forward-looking scheme in that it is available to disabled drivers and passengers alike; so that at last those who are too disabled to drive will receive mobility assistance, and also those receiving the allowance will be free to choose on what form of mobility they spend it.

The allowance seems to me to be less encouraging in some aspects, as the noble Lord, Lord Aberdare, has already hinted. It also has some aspects which need explaining. I have given the noble Lord, Lord Wells-Pestell, prior and detailed notice of my questions and he has already answered a small proportion of them. I very much hope that his answers will be not only enlightening but also reassuring. The questions fall roughly into two groups: first, the allowance itself; and, secondly, the people involved.

First, let us consider the allowance itself. When the proposed allowance was announced in September, 1974, it was, as the noble Lord has already said, to be £4 per week. Since last September, the annual cost of motoring for the disabled driver or passenger has increased by between 30 and 33 per cent., depending on what type of car and adaptations are involved. It can now easily cost between £900 and £1,000 per year for a disabled driver or passenger to run and maintain a car. In view of this large increase in costs, why has the mobility allowance been increased only from £4 to £5? I cannot agree with the noble Lord that it is a substantial improvement. Indeed, I wonder why the sum of £5 was chosen at all. Perhaps the noble Lord can tell me how this figure relates to the cost of private motoring—the tax element, the cost of providing an invalid "strike" or car, the cost of a hired car and the cost of transport. I should be very glad if he could tell me how this figure was arrived at.

Next there is the question of whether the mobility allowance will be increased to keep pace with rising costs. In view of the speed with which motoring costs are increasing I find particularly worrying the statement in another place during the Committee stage of this Bill to the effect that the Government are not guaranteeing annual uprating in their proposal. Most social security benefits are subject to annual uprating: why is the mobility allowance not being treated in the same way? I wonder what assurances the Government can give to disabled people concerning any uprating of the mobility allowance. Can the Minister at least assure the disabled that the amount of mobility that they can purchase with the allowance in future years will not be any less than they can buy with £5 a week today?

I was disappointed to hear the Minister say that the allowance will be taxable. I know that the Joint Committee on Mobility for the Disabled, of which I am a member and on which 28 organisations concerned with the disabled are represented, has made strong representations that it shall not be taxable, and I wonder just how many other organisations concerned with the disabled have done so. in the case of the amount being taxable, any recipient of the allowance who pays tax at the standard rate of 35 per cent. will receive only £169 per annum, and it would be even less if it were taxed as unearned income. In some cases it would not even cover the tax element in private motoring, which can easily amount to between £155 and £175 a year. Private motoring is very heavily taxed on the grounds that it is a luxury, but for the disabled passenger and driver it is clearly a necessity and, to put it mildly, it is extremely unsatisfactory if the mobility allowance will not even offset motoring taxes. So rapid has been the rise in motoring costs over the past three years that in order to provide the same help as was provided by the £100-a-year tax free private car allowance when it was introduced in 1972, the after-tax annual amount of the mobility allowance would have to be at least £200. I know it has been argued that the mobility allowance should be taxable in order to give the most help to those in greatest need, but disabled people are aware that this is a specious argument because they know that different amounts of tax free social security benefits are paid according to when and how people become disabled. The tax free base of these various benefits bear little relationship to the degree of disability or the financial needs of the disabled. I shall be grateful if the noble Lord will at least tell us whether the allowance will be taxed as unearned income or as earned income.

There is another facet of the allowance that I should like the Minister to expand upon. It has been stated in another place that the allowance will not be means tested and it will be generally disregarded in considering entitlement to other benefits. Will the mobility allowance be treated in exactly the same way as the attendance allowance in this respect? Will it be totally disregarded for the purposes of supplementary benefit and for assessing income for the purposes of family income supplement rent and rate rebates, free school meals, free school milk, et cetera? Furthermore, will the allowance affect, or be affected by, any travel to work assistance that a disabled person may receive from the Department of Employment? I also wonder what the position will be in regard to vehicle excise exemption. As your Lordships probably know, disabled drivers and certain disabled passengers are entitled to claim exemption from this tax under the present vehicle scheme. Will the Government give an assurance that these disabled drivers and passengers and any future such persons will continue to enjoy exemption? I hope the Government can assure disabled people that they have no intention of amending existing legislation covering exemption from VED because if this exemption is withdrawn many disabled drivers and passengers will be considerably worse off.

I should now like to turn from the allowance itself to the people who are to benefit from it. It was stated in another place that "The allowance will be phased in over a three-year period. We intend to work as quickly and as flexibly as possible by bringing small age groups within the broad age plans and in the order of 15 to 50, 5 to 14, and finally 51 to pension age; "and again" the process of take-up, which we hope will start in January 1976, should be complete by March 1979." Indeed, the Minister has told us today that this process will start in January 1976; but does this mean that all eligible disabled people within the age group of 15 to 50 will actually start to receive payment of the allowance in January 1976? I wonder whether the noble Lord can give any indication of when the allowance will start for the age groups 5 to 14 and 51 to 60 or 65 respectively? If the phasing is not completed before March 1979 no woman who is now aged 57 and no man now aged 62 will be able to receive the mobility allowance, and until what date will men and women approaching pensionable age be able to claim the invalid tricycle or the private car allowance for the first time?

Can the noble Lord also give us some idea what the small age groups within the broader age bands may be? This leads us to another problem. As your Lordships will know, some people are entitled to a small car instead of the invalid tricycle under the existing vehicle services, and when the mobility allowance becomes payable disabled drivers will be able to choose between the allowance and the invalid tricycle. Does this mean that in future those people who might have become entitled to a small car instead of an invalid tricycle will no longer be able to claim one? Disabled mothers in sole charge of a young child for a substantial part of the day form one of the groups concerned; are they to return to their previous sorry position? The mobility allowance will in no way enable those who cannot already afford a car to buy a car—let us be under no illusion about that.

And what are the prospects for people who reach retirement age? In another place the Minister for the disabled gave an assurance that existing beneficiaries under the present arrangements would be able to obtain their benefit or revert to it provided that they still met the conditions under which it was awarded. People over pensionable age who receive the £100 per annum private car allowance will keep it, despite the fact that the mobility allowance is not payable over pensionable age. But what will happen to future recipients of the mobility allowance? When a woman reaches 60 or a man 65 will those still able to drive be able to revert to the invalid tricycle or to the private car allowance, or will they cease to be eligible for any financial assistance towards outdoor mobility at a time of life when it is very important for them to retain their contacts with the community and to play their part in the life of the community? Very few women aged near 60 or men aged only 65 are willing to be confined to their homes or would agree that they have no need for outdoor mobility. I hope the Minister will be able to offer us some reassurance on this point.

An entirely different question is that of the medical criteria, which I feel may present problems. At the beginning of the clause on the mobility allowances it says that to be eligible for the allowance a person must be "suffering from physical disablement such that he is unable to walk or virtually unable to do so." It was stated in another place that" The single criterion reflects the sort of medical criterion now in use for the vehicle service; the essential difference is that we are now replacing a discretionary scheme with a statutory scheme. There will be a statutorily defined base, independent adjudicating authorities, medical boards and medical appeal tribunals, insurance officers, local appeals tribunals and National Insurance Commissioners. There will be formal appeal rights." Can the noble Lord outline exactly what procedure a claimant will have to follow when pursuing a claim for a mobility allowance? Bearing in mind that the criterion of being either unable to walk or virtually unable to do so is more of a mechanical engineering criterion than a medical criterion, will the claimant be able to appeal against an unfavourable decision on his being "unable to walk or virtually unable to do so "?

Also will an unsuccessful claimant be able to attend an appeal in person? Will he be allowed to be legally represented at an appeal? It was further stated in another place that "it has not been possible to retain the additional social criterion of the vehicle scheme regarding the need for transport to get to work or run a home." Does this mean that those now covered by these criteria in category 3 and such future people will not be entitled to the mobility allowance, because these are only very slightly less severely disabled people who may very well require mobility help to get to work or to attend a place of education?

Finally, there is one more point which I find disturbing and I hope to be reassured upon it. In subsection (5) at the bottom of page 13 and the top of page 14 in the Bill it reads Regulations may prescribe cases in which mobility allowance is not to be payable, or is to he payable at a reduced rate, while the person otherwise entitled has the use"— now it is part (b) which worries me— of any prescribed description of appliance under the enactments relating to the National Health Service. Such wording would seem to allow the mobility allowance to be withdrawn from, or reduced for, those in possession of an ordinary wheelchair such as I am sitting in now, or calipers, or even crutches, or, to stretch a point, even National Health Service spectacles or dentures. I cannot believe this is the intention, and my Lords, we learn from a statement in another place that "Regulations will be made in due course. We had in mind the occupant-controlled, powered, out-of-door wheelchair." I do not find this statement totally reassuring. Can the noble Lord give us an assurance that the mobility allowance will never be reduced for any appliance or aid which is now issued, or may be issued in the future, which can be used indoors, or for purposes other than mobility. Can the Minister also assure disabled people issued with powered wheelchairs for indoor use that these will not be classified at some future date as being suitable for use outdoors? The Money Resolution will severely limit the extent to which this House can improve the allowance, which makes it more even essential for the noble Lord to explain the details, so that we may know what to do on a future occasion. I think he will agree that it can, and should be, improved in future years. It is a progressive scheme in that for the first time it embraces disabled passengers and offers freedom of choice. Although depressed by the announcement that the allowance will be taxable, I trust that the noble Lord will he able to give me some answers that will prove that the scheme will not be retrogressive in other respects.

6.22 p.m.

Baroness SEEAR

My Lords, I wish to intervene briefly in this debate, in which many with a great deal more expert knowledge that I possess are speaking. I apologise for the fact that as soon as I have spoken I shall have to leave the Chamber because, not to put too fine a point on it, I have had two guests waiting in the guest room since six o'clock.

My Lords, unlike some of the previous speakers, I should like to give at least a modified welcome to this Bill, which is a great improvement on previous Bills we have seen in this sphere. There are only a few points I wish to make. I am very glad indeed that it has been possible to effect some sort of marriage, even if it is not perfect, between the occupational pensions scheme and the State pensions scheme.

I want to underline the importance of the points made by the noble Lord, Lord Aberdare, and by my noble friend Lord Byers. They were different but connected points in relation to occupational pensions schemes. Like the noble Lord, Lord Aberdare, I particularly welcome the partnership with the occupational pension scheme because of the clement of funding it introduces into the financing of pensions. I feel we are being extremely trustful and optimistic in assuming that future generations are going to support this level of payment of pensions on an on-going basis out of current earnings. Unless the economy rights itself and stays on a far more sound basis than we have experienced over the last two decades, it will be asking a very great deal of them to expect that the level of pensions that we are forecasting and promising to people retiring over the next two decades is going to be financed by current earnings of a reduced group of earners, because that is what it means.

While one accepts that the intentions of this Bill are entirely honourable, future Parliaments and future generations have it in their power to make alterations to Bills of this kind; so the importance of funding and of real savings behind pensions cannot be overestimated. Of course, with this goes the importance of seeing that the funded pensions, the occupational pension schemes, are themselves in a position to honour the promises that are made. This brings us back to the point made so forcefully by the noble Lord, Lord Aberdare, which I should like to reinforce—that it is pie in the sky to think we can guarantee people adequate pensions in the future unless the economic situation is brought under control, and brought under control quickly. The anxiety of those concerned with pension funds and occupational schemes throughout the country at the present moment is great and growing, as was stressed by the my noble friend Lord Byers. Under the present situation, to talk optimistically and in a facile manner about the position of pensions is not looking facts plainly in the face.

There is another element of this new scheme which I welcome very strongly, although with certain not very great reservations. This is the extent to which the new scheme can be claimed to be a fresh deal for pensions for women; the extent to which we are moving away, although not as much or as fast as I should like, from the idea that a woman's pension depends on her marital status, on her husband having contributed, and the woman therefore being able to get a pension. She does not in fact get it under the old scheme; she is allowed it only as the dependant of her husband. The idea that that is on its way out, although not as fast as I should like, is welcome, even though it is dragging its feet a bit.

I also welcome the fact—and this is part of the deal, of course, as these always involve a deal—that married women are going to be given the option to contract out. We are the only country which has had the extraordinary provision that a married woman can take a job, but does not take the obligation of paying into a pension fund. There are two sides to this matter. It is not only that she does not get the rights that flow from being a contributor; she does not play her proper part in contributing to pension funds, and it seems to me right and proper that she should do this.

My Lords, I am delighted that the Government have, although with certain hesitation I observe, made up their mind that women are to be made to contribute and to act exactly as if they were male earners, contributing to the pension scheme in the same way as men. I have no doubt that I shall be saying it a good many times over the next few weeks, but for my part when I want no discrimination, I want no privileges either, and the privilege of not contributing is one I should like to be without. Of course, speaking as a single woman, it never has been my privilege not to contribute, so perhaps I am slightly biased in that direction, too. I do not see why a single woman should be forced to contribute while married women are not.

While I accept there has to be a transitional period for women already in employment and who have contracted out in such regrettably large numbers, I should like to know more from the Government as to how long that transitional period will be. In my view it ought to be very short indeed. I very much hope we shall not be left with a situation in which large numbers of women, because they entered employment with the right not to contribute, will continue not contributing for a long period of time. It seems to me that there must be a short period in which they can adjust to the new arrangements, but that in a short period of time—

Lord WELLS-PESTELL

My Lords, the noble Baroness, Lady Seear, said she would not be able to stay, so perhaps I may be allowed to intervene to answer that one particular point now. No decision as yet has been arrived at. I do not think the time is going to be a long one, but it is still under discussion.

Baroness SEEAR

My Lords, I thank the noble Lord very much for that information. It reinforces my determination to stay as long as possible and to make the point as strongly as possible. It seems to me that all that is required is that women should be given due notice that they will be expected to pay at a fixed date, and that that date should not be very far ahead. Surely what we want, and what we are edging towards, is a situation in which every individual, regardless of marital status, carries his or her own contributions and claims to all kinds of benefits—sick benefit, unemployment benefit and pension.

The Government have made what seems to me to be a most welcome addition to pension provision, getting into this situation by allowing contributions for the time the woman is at home looking after her children. Because of that, there seems to me to be no reason any longer for having two systems, the system of pension which is by virtue of contribution and the system of pension which is by virtue of being the wife of a man who has contributed. We ought before very long to phase out the dependants allowance to the man, make the corresponding adjustment in contribution to be paid, and build up the right of the woman to benefit, be she married or be she single. I hope that the Government will not listen to the voices that came from the Opposition in another place pointing out that four-fifths of women have shown that they do not want this benefit by choosing not to have it when it was optional. There are all sorts of reasons for that, no doubt; but those arguments, though they may have persuaded the women, are not sound arguments. They having gone so far, I very much hope the Government will go the whole way and draw a line beyond which there will be no right of option, whether or not the women have been employed in the past.

6.32 p.m.

The Countess of LOUDOUN

My Lords, the mobility allowance has been universally welcomed, and I have no wish to criticise it as such, but its rapid passage through the Commons without benefit of a Second Reading debate, combined with the restrictive Money Resolution, precluded debate on a number of important issues. Answers to many important questions, especially the exclusion of the two to four-year-olds, were quite inadequate. No regard whatever has been given to the real situation of young handicapped children. Very young children can have extreme mobility problems. Many are already using wheelchairs or can only be transported in buggies. Consider, for example, the situation of a mother whose spastic child aged three cannot support himself on his legs, attempting to fold a pushchair to get on and off buses or tubes and trying at the same time to manoeuvre shopping bags et cetera. She must leave the child to wobble and fall, totally dependent on help from others. When she has other children the situation is even worse.

There are also children who, though physically able to walk, present severe managerial problems. Such children have mobility problems inasmuch as their behaviour may affect the whole family and tie them to the house for long periods. To quote an example, mentally handicapped children may be hyper-active, aggressive, violent and given to extremes of anti-social behaviour. It should be recognised that in some cases the pre-school years can impose more of a burden on parents than later years. The problems of mobility do not relate solely to attendance at school, and may even be eased at that stage by provision of school transport. If the age limit was put down to two years, this would also bring it into line with the attendance allowance.

With regard to the restrictions on the allowance to people of pensionable age, mobility problems do not end at 60 or 65. This has been one of the most frequent and fierce criticisms made to the Central Council for the Disabled Working Party which has been touring Britain. Disabled pensioners cannot take advantage of numerous concessions available to others. I believe the cost of concessionary fares is estimated at £35 million. The exclusion from benefit of people of pensionable age is an unwarrantable discrimination against the elderly, many of whom have been drawing low incomes for long periods and have had no means of setting aside resources. Moreover, compared with the non-disabled elderly, the severely disabled elderly have additional expenses or additional needs which reduce their relative living standards.

I understand that the allowance is to be taxable. Why? To me this seems quite unjust. Industrial injury and war disablement pensions are not taxed—so why should the mobility allowance be taxed? I would make a plea to the Government to reconsider this proposal. Lastly, I should be grateful if the Minister would inform me of the present position with regard to the disabled housewife. She seems to have disappeared into a sort of limbo.

6.35 p.m.

Baroness PHILLIPS

My Lords, I will not detain your Lordships for very long this evening. I am very sorry that the noble Baroness, Lady Seear, has left, because I am afraid I must disagree with her on one point she made. But I feel sure that any words I say in this Chamber will be conveyed to her. I should first like to compliment the Minister on the way he has explained this very complex Bill. As the noble Lord, Lord Aberdare, said, this is the third time we have gone through this, and each time I study it and each time I am totally unable to understand certain clauses. If I appear to put very simple questions to the Minister, it is because I should like some straightforward answers on the record.

In the first place I was rather enlivened to read some of the clauses because I thought we were getting some special magic. One I noticed said "Special provision for surviving spouses ". I thought perhaps we were going to learn some way in which we could all survive our spouses, but I went on to discover that it was nothing of the kind. I should like to ask the Minister about a point which he did not make very clear. Can the employee collect the contracted-out pension as well as under the State scheme?

When we come to the question of the rights of women, I was interested to hear the noble Baroness, Lady Seear, say that so many women had opted for the lower payment. I think it is only fair to say that of course women did not draw the full benefit, so it was natural that they should opt for the lower payment. I think it is right that in a Bill of this kind we should remove that option, but I am concerned at the rate at which this will be removed; that is, the time factor. We have many married women particularly who work part-time, or for short periods of their working lives outside the home. As I understand it, they are to make a payment of 5½ per cent. They may well be on a low wage, like £20 a week, and paying in 5½ per cent. of that, plus tax, plus National Health. At the end of the seven years there seems to be no guarantee, at least not from the Bill, that when the woman becomes 60 she will be able to draw this pension. I realise when the Act is to take effect, but I should like to know how long one must pay in to draw some of these benefits.

I was interested to hear the Minister describe Clause 6. He described how the State pensioner had a basic component which was linked to the contributor's previous earnings. He then went on to explain that there was an additional component, and he made some mention of seven times the figure. But the actual description in the Bill really defeats me. Subsection (2) says: The additional component shall be the weekly equivalent of 1¼ per cent. of the amount of the surpluses mentioned in subsection (1)(b) above or, if there are more than 20 such surpluses, of those 20 which are the largest. I should be interested to hear a really clear, simple definition of that. Undoubtedly, working as I do with women, these are the kind of questions one is asked.

I am extremely sorry to see that yet again, in what is a very imaginative piece of legislation, we are carrying over all the worst inequities of the earnings rule. We are still introducing the earnings rule, and here was an opportunity to level this up. We are still dealing with the question of the younger widow. We still have the woman who comes into the scheme younger and therefore receives less. We still have the earnings stop. We still, so far as I can see in Clause 11, have the strange rule of the one State payment; no matter how much you pay into the scheme, nor how many qualifications you have for drawing out, in the end you will get only one payment. If you receive a widow's pension and make a full payment of stamp, you cannot draw unemployment benefit, although you are no less unemployed because you are a widow and you are no less a widow because you are unemployed. But apparently there is an inviolate rule that the State pays you only once in case you let it go to your head. The way it is enshrined in the Bill is that the widow does not get more than one component.

This is a very imaginative piece of legislation and it is a shame that some of these strange anomalies, which, after all, have only crept in over the years, are still to be carried over. I shall be having another go at this during the Committee stage and supporting my noble friends on the other questions which have been raised, but I feel that the Minister would have been disappointed had I not intervened on these rules. I would congratulate him on the way he has introduced this Bill this evening.

6.41 p.m.

Lord BANKS

My Lords, I begin by declaring an interest. I am a director of the life and pension subsidiary company of a firm of Lloyd's brokers. I should like to thank the noble Lord, Lord Wells-Pestell, for his lucid exposition of the provisions of this Bill, and many of those provisions, as my noble friends have made clear, are welcome to us. One thinks of the mobility allowance, and of the treatment of women in the Bill to which my noble friend Lady Seear referred a few minutes ago. I should like to make one or two criticisms of the fundamental principles on which the Bill is founded, and I hope that the noble Lord, Lord Wells-Pestell, will forgive me for introducing a slightly discordant note so late in the debate. My principle criticism of the Bill is that it is a long-term and over-elaborate method of tackling the main pension problem which we have to face. That problem is simply that the basic pension is inadequate. Some 2 million old age pensioners have recourse to means-tested supplementary benefit, and a very large number more could qualify for this benefit if only they applied.

The Liberal Party has all along argued that the important need is to raise the basic pension to an adequate level, and our interim target to be achieved over a period of years has been 50 per cent. of average national earnings for a married couple and 33 per cent. for a single person. In April this year, the actual figures were 33 per cent. and 21 per cent. respectively. The period of years we had in mind originally in which to effect this increase was seven. But, of course, this increase would cost a great deal of money. So successive Conservative and Labour Governments, rather than face this expense in the immediate future, have evolved elaborate schemes designed to provide adequate pensions in anything from 20 to 40 years time!

The present Government's proposals in this Bill would provide higher earners with more than 50 per cent. of average national earnings for a married couple after 20 years in the scheme, but this is still far short of the two-thirds of the final salary which they might expect to get through a good occupational scheme. Low earners would not reach the 50 per cent. of average national earnings level for a married couple. The Government apparently feel that to get the higher earners to pay for lower earners' pensions they must offer the former a small and unappetising carrot. I very much question the need for the carrot. I believe that higher earners would recognise the need to provide an adequate flat level pension for all, paid for on an earnings related basis. The Bill does nothing for existing pensioners and very little for those due to retire in the near future. We shall have the position that among pensioners the oldest are poorest until all those born before 1933 have died.

The second criticism is simply this. To provide these pensions, open to criticism on the grounds I have just set out, the burden is thrown on to future generations, as the noble Lord, Lord Aberdare, explained so graphically earlier on. Future generations are expected to pay for the pensioners of their day more than we are prepared to pay for our pensioners today. Yet surely we must face the cost ourselves as soon as possible. Given an adequate flat rate pension at the level suggested—the level I suggested earlier of 50 per cent. for a married couple and 33 per cent. for the single person—then we have taken the view that there is no need to compel people to save for further pension. Any married man on half average national earnings would retire on full pay. Any married man on average national earnings would retire on half pay. But some arrangement must be made to compensate for the disadvantage suffered by those employed persons who have no occupational scheme available to them to supplement the basic pension, and to ensure that their pension corresponds more closely to their final earnings.

Clearly, at the basic pension levels which I have suggested, we are thinking of the rather better off, because the people at the lower end of the scale, as I have already explained, will get a fairly high percentage of their earnings from the higher basic pension. At the moment, employed persons without an occupational scheme are allowed to set aside up to 15 per cent. of their earnings in a retirement annuity with an insurance company or friendly society, and secure complete tax relief on their contribution. We believe that the first, say, 3 per cent. of this contribution should be matched by a similar contribution to the annuity from a central account administered by the Government and financed by a levy on all employers with no adequate occupational scheme. It would be up to the employee not covered by an adequate occupational scheme to decide whether he wished to take advantage of this opportunity. We should be helping those who wished to help themselves. The criteria for an adequate occupational scheme could be the same as in the Bill. The levy would be a compulsory one on all employers with no occupational scheme or with an inadequate occupational scheme.

The combination of the high flat rate benefit and the central account scheme would have many advantages. By progressively increasing the basic pension, it would help those already retired. It would thus make a direct attack on inadequate pensions. The central account arrangement would pose no actuarial problems for the State, for it would not involve a vast State fund as in the case of the Conservative Government's Bill. The dividing line between State pension and occupational schemes would be simple and clear. There would be none of the complexities of the contracting out proposals which are incorporated in this Bill. Everyone would understand very clearly what their basic State pension entitlement was. It is unlikely that many people will understand exactly how their pension entitlement is arrived at under the proposals in the Bill.

The main argument against a high flat rate pension designed to take pensioners off supplementary benefit is that it is politically impossible to raise the pension for all retirement pensioners and to knock the increase off the supplementary benefit. This, it is argued, is to increase the income of the better off pensioners while leaving the poorest with the same income. This is described as a waste of scarce resources. Yet this is precisely what the present Bill is designed to do, but over a longer period of time and for tomorrow's pensioners, not today's. The Government hope that by a sleight of hand, the creation of two components of pension—basic and earnings-related—this fact will not be noticed. Furthermore, under the Government's proposals the oldest pensioners will be the poorest, so far as State pension is concerned, until well into the next century.

Quite clearly, increases which are given twice yearly to match increases in national average earnings must themselves be matched by increases in the supplementary benefit level. But increases which are given over and above with the object of increasing the percentage of national average earnings which the pension represents need not, in my view, be so matched. They would, in effect, consolidate into the basic pension as of right part of the supplementary benefit pension which the supplementary benefit pensioner has been enjoying, eventually overtaking the supplementary benefit pension entirely.

Another reason for adopting the system I have outlined as opposed to the system in the Bill is that ultimately it is to be hoped that the State pension, together with all other social security benefits, will be provided for by means of a tax credit system. The pensioner's income will then be brought to the required level by means of a combination of credits: basic credit, retirement credit, and housing credit, for example. The total will correspond to the required percentage of average national earnings, and it may well be possible to fix that percentage under the tax credit system even higher than the figure I have put forward as a more immediate target. Furthermore, we could then reach the desirable position where there is a basic and retirement credit for every pensioner, so that a married couple receive the same income as two single people living in the same household. The system of a high flat-rate pension coupled with the central account arrangement would give way more easily to a tax credit system than the scheme outlined in this Bill. The central account system would not be affected and the basic pension could easily be provided through the system of credits.

My Lords, I have thought it right in this Second Reading debate to challenge the basic concept of this Bill and to show how the problem might be tackled in another way. Nevertheless, I accept the view that whatever scheme is adopted now should end the chopping and changing which has taken place in the pensions field for so long. All those connected with pensions are sick and tired of working hard to prepare for particular Government plans, only to find that after much toil and trouble these plans are scrapped. In Committee, we shall have to accept the basic principles of the Government scheme which, while open to the criticisms I have already made, are preferable to the Crossman and Joseph plans. Nevertheless, our attitude to the Committee discussions will naturally be coloured by the point of view which I have been elaborating today. I repeat, however, that a period of certainty and stability for pensioners is much to be desired and it is to be hoped that all Parties will co-operate to bring it about.

7.2 p.m.

Lord SANDYS

My Lords, my Party very much associates itself with what the noble Lord, Lord Banks, just said, in that we wholly reject the concept of constant chopping and changing. We also associate ourselves with the Liberal Party on what the noble Lord, Lord Byers, said about a simple system commending itself. Such a system commends itself very strongly to my Party. Perhaps at the outset I should mention some remarks made in December 1973 by the noble Lord, Lord Houghton of Sowerby, who, as a veteran politician of the Labour Party, gave his Party some sound advice when he said: I am convinced that it would be a great mistake for a Labour Government, should there be one after the next General Election, to suspend the operation of the new scheme. … The 1973 Act should stand for a while before embarking on the next move forward ". I was one of those present in the Gallery in another place when the present Secretary of State for Social Services made her debut in that high office in March 1974, and I was dismayed, as were all members of my Party, when she announced to the country that it was the intention of the Government to suspend the provisions of the Social Security Act 1973. It is a matter of record that that was done by means of an Order which it was impossible to debate in either House, and we set that aside because, as my noble friend Lord Aberdare said, we are attempting in the course of the discussions of this Bill to look at it in a consensus manner as far as possible.

I refer first of all to the library of documents we have before us. It would be tedious to enumerate them—I have ten beside me at the moment—and I wish to associate myself strongly with what the noble Lord, Lord Byers, said about the debt of gratitude we owe not only to the staff of the Social Security Department but also to the Government Actuary, because there is no question but that among the principal documents before us are the financial provisions relating to this measure. In Better Pensions, which is Cmnd. 5713, the Secretary of State commends the White Paper in the final sentence of her opening address in these words: So I invite the fullest public debate and discussion of these proposals, confident that they will provide real security in retirement, widowhood and chronic ill-health". Much as my Party would like to associate itself with those thoughts I regret that we cannot wholly do so, because, as I shall set before your Lordships, there are many problems which we believe are very pressing indeed. I first draw the attention of the House to the Government Actuary's Report. This Report, which is set before us, follows a rather similar Report, the first one being Cmnd. 5143 which was associated with the Social Security Act 1972, and the present Government Actuary Report is Cmnd. 6083. For 1975–76 the estimated outgoing of the National Insurance Fund is stated on page 10 as £7,198 million. The noble Lord, Lord Wells-Pestell, mentioned the figure of approximately £6,500 million and I have no doubt there are good administrative reasons for his giving that figure. I do not quibble with his statement; nevertheless I draw your Lordships' attention to the fact that in the earlier Actuary's Report, for 1972, Cmnd. 5173, the estimate for the same year, 1975–76, was £3,832 million. The estimate has risen by approximately 100 per cent.

This is a truly staggering sum of money and I associate myself strongly with what the noble Lord, Lord Byers, the noble Lord, Lord Banks, and the noble Baroness, Lady Seear, said in this regard because there are strong reasons why we should look forward and backward. We look forward to future generations of pensioners and, as the noble Baroness said, we are charging them with the task of responsibility for looking after those pensions. My noble friend Lord Aberdare put it very strongly indeed when he said that we as a Party associate ourselves with the concept of funding pensions.

This is an exceedingly complicated matter and we should set the documents aside for a moment and cast our minds back to a point when the pensions system was set in motion. I look back to 1909 when the total number of old age pensioners was 580,000 and they drew a total sum from the Revenue of £7.1 million. Today, curiously enough, there are in our estimate 7.5 million old age pensioners drawing a total of £4,816 million. This is a matter of great satisfaction to my Party and I feel to all noble Lords; that from the point of view of care for the aged this has been achieved over this long period. Nevertheless, it carries with it an important argument that there is an aging population running at a very high rate. Only about 2 million people were concerned in the bracket in 1909 and today we are considering 7 5 million. A future census will probably reveal a higher growth rate and all the difficulties associated with a small working population and a very large retired population. My noble friend Lord Aberdare has already dwelt upon this fact, but I do not think we can possibly emphasise the point too strongly. This is a promise made to the country on the basis that we hope that future generations will pay these very large sums of money. The undertaking that these pledges will be honoured in the future is something we should quail at before lending our full support to it.

I turn to what my Party associated itself with at the time of the last General Election. Before that Election, it was noted by the last Conservative Government what a very strong contribution was made to disabled and handicapped people. Again, it is a matter of public record that under Sir Keith Joseph the tax free attendance allowance was introduced for the first time and was then extended. As a result, getting on for 200,000 families, which had no let up in the business of looking after severely handicapped members of the family, secured some relief and compensation for their efforts and expense. Next, the long term special invalidity benefit was introduced, giving worth while help on top of ordinary sickness benefit. Thirdly, Government spending over the years 1970 to 1974 gave special emphasis to the needs of handicapped people. In the debate this afternoon, the noble Baroness, Lady D'Arcy de Knayth, laid special emphasis on Clause 22, which deals with the mobility allowance. In her remarks she—if I may so describe it—peppered the noble Lord, Lord Wells-Pestell, with questions in this regard. I lost count after about 30 and she raised so many points of great complexity that I feel it would not be productive to add to them, though I had a number of parallel questions myself.

We regard the mobility allowance and the question of mobility as of great importance, but I feel that it would not be appropriate to dwell upon it for any length of time, except to say that there is an clement of choice in the present Bill for those who may wish to retain the, to some extent, despised invalid tricycle and the offer of a mobility allowance and the possibility of finding a suitable four-wheeled car. In another place, we have noted the extent to which Members have mentioned the amount of anxiety communicated to them in letters from those presently using invalid tricycles who feel that they may be deprived of them as a means of mobility. We await with interest the answers to the questions put by the noble Baroness and we look forward to hearing the Government's reply in that regard.

I do not intend to speak at great length this evening. The noble Lord, Lord Wells-Pestell, in his very lucid introductory speech, answered a number of the questions which we had in mind. Nevertheless, I think it only appropriate at this stage to warn the noble Lord that we shall be introducing a number of Amendments at a suitable point in Committee. We look forward to co-operation and to discussions with the noble Lord, should he make available to us the services of some of his very valuable staff to go over the intricate and detailed points referred to both by my noble friend Lord Aberdare and by other noble Lords who have spoken this afternoon. It is in a spirit of consensus that we approach the Bill and I feel sure that the House will be rewarded in that respect.

7.5 p.m.

Lord WELLS-PESTELL

My Lords, I do not really know where to begin. I am conscious of the time, because my noble and learned friend who sits upon the Woolsack has two Bills to bring before your Lordships and, if I am to do justice to all the questions put to me, I shall be on my feet for far longer than I was when I introduced the Bill. I shall try to deal with some of the questions, and I should like to say to the noble Baroness, Lady D'Arcy de Knayth, that it is perfectly true that I received a letter from her yesterday asking me nine questions, but each question had, I think, three, four or five other questions incorporated in it. I counted them and they came to 39, so they will always be known, as far as I am concerned, as the Thirty-nine Articles of the noble Baroness. I do not propose to deal with them all this afternoon, and I do not think the House would wish me to do so. However, I will write to the noble Baroness and answer every one of the questions, and I shall put the responsibility on her to let her noble friends know the Government's thinking on these matters. I shall touch on some of them, but what I do not deal with tonight will be answered in writing long before the Committee stage.

Lord ABERDARE

My Lords, if the noble Lord is to write to the noble Baroness, would he be kind enough to send a copy of his letter to us and, no doubt also, to the Liberal Party? These are important and interesting questions and it would be very helpful to know the answers.

Lord WELLS-PESTELL

My Lords, working on the assumption that the noble Baroness does not mind my issuing a copy of my correspondence with her, I shall be delighted to do so. The noble Lord, Lord Aberdare, made one point and though I know that he does not really want me to deal with it, I feel that it is perhaps a point of general interest. He asked whether we had our priorities right or whether we were giving too much to the pensioners. I do not believe that I have misquoted him when I say that. I believe that we must bear in mind that the pensioners' share of total personal consumption is at the present moment something like 12½ per cent. The new scheme will increase the total personal consumption of pensioners over the years, although probably not by a great deal. It may take it up only to about 15 per cent. The working population and their families have something like 84 per cent. of the total personal consumption, and I feel that this redistribution in favour of the old is one which we should aim at. I say so, because I feel that there is sometimes a feeling that we are doing too much in one direction. However, I believe that we are doing it in the direction where people are very much in need.

The noble Lord, Lord Byers, raised the question of 1978. I think I would say that we accept that. The noble Lord made out a very strong case—there is no doubt about that—and I believe that we accept his arguments and reasons. If we are minded towards 1977—and we are not unmindful of the difficulties—it is because it would bring the measure forward a year and would enable people to begin to earn the new additional components sooner. It is a finely balanced issue and I would not presume to know the answer.

The noble Lord, Lord Byers, also raised the question of a greater incentive to contract out. This matter is still under discussion between the Government and pension organisations, as the noble Lord knows better than anybody else in your Lordships' House. It is a constructive dialogue, so I am informed, and I believe that we must leave it to run its course.

To come to some of the questions of my noble friend Lady d'Arcy de Knayth, taxation of social security benefits and the exemption of certain benefits from taxation is essentially a budgetary matter. But I can assure my noble friend that this new allowance will, like other taxable national insurance benefits, count as earned income for tax purposes. We must bear in mind that, whatever income we have, if our income generally puts us in the tax bracket we are surely in a slightly better position than people with income who do not come within the taxable situation. It seems reasonable that this should be so. In the type of society in which we are living, and bearing in mind the pressures on that society and on Government to provide, as we provide—let us be frank about it—a fairly vast and comprehensive network of social services, we cannot do it on the basis that all those services are tax-free. If it were done on that basis it would mean that many people who could afford to pay tax would escape paying.

I was quite disappointed—almost appalled—when the noble Baroness said that she would introduce an Amendment to the earnings limit. She is not doing her cause any good by such action. I do not say this in any sense of criticism nor do I say that she ought not to do it. She must do what she thinks is right. But I failed to convince your Lordships on two occasions that people who are in receipt of an invalidity allowance, or a pension—call it whatever you like—get it because they have been certified by a doctor as being incapable of work. How, therefore, can you have a wage stop? Immediately such people go to work, they are, in effect, saying that they are not incapable of work and therefore they ought not to have the allowance. I appreciate that a great deal of emotion is discharged in this House when such matters are discussed. Noble Lords allow their hearts to run away with their heads, and I can understand that. But we must bear in mind the nature of this payment. It is an invalidity pension, granted on medical evidence that a person is incapable of work. Directly you say that there should be a wage stop, you are saying that those people are capable of work. I advise the noble Baroness to think about this point, because I do not think that what she proposes would be helpful in the long run. One of these days someone will have to look at this situation and consider whether if people who are receiving this pension are in fact working it can be held that they are incapable of work.

The noble Baroness also raised the quesion of the vehicle excise licence exemption. I understand that recipients of mobility allowances will not be eligible for vehicle excise duty exemption. In many respects this would be an unfair discrimination in favour of motorists as distinct from other people who are receiving the mobility allowance for other purposes. The noble Baroness also asked whether the allowance is to be disregarded for other benefits. The allowance will be disregarded generally for supplementary benefit purposes, and also for such benefits as family income supplement, rent and rate rebates, and free school meals and milk. It will not affect, or be affected by, the assistance with travel-to-work schemes operated by the Department of Employment. The noble Baroness also asked why there should not be annual uprating. The allowance is not a maintenance benefit and automatic annual review is not felt to be appropriate. Nevertheless, from time to time we shall look at the mobility allowance amount in the light of costs generally. I must make it clear, however, that it is not a maintenance benefit; it is entirely different from that. But clearly whatever allowances any Government give, they must be looked at from time to time.

The noble Baroness also raised the question of the increase of the allowance to £5 per week in view of increases in motoring costs. The figure of £4 per week announced in September last year was at the 1975–76 rate. An analogy with the increased cost is not very realistic. There is moreover no specific relationship between the allowance and the cost of private motoring, car hire or public transport. As the noble Baroness knows, this is a mobility allowance which people can obtain for a variety of reasons. I do not want to go over the ground in detail, but, for instance, it relates to those who cannot drive because they do not have a car but who know someone who will drive them around. The allowance is paid to enable such people to get to various places. It is not an allowance intended for acquiring a car, but if people have a car the allowance can help them with the running expenses. It is a new allowance, as the noble Baroness knows. Whatever criticisms noble Lords may have, the fact remains that it is a new benefit which we have introduced, and I hoped that there would be more appreciation of it and rather less criticism.

I was also asked by the noble Baroness what will be the procedure for obtaining a mobility allowance; will there be an appeal; and can the claimant appear in person or be represented? The procedure will involve completion of a claim, then a medical examination and a decision by an insurance officer. There will be provision for appeal to the Medical Appeal Tribunal against a rejection and the claimant will be able to appear in person and can be legally represented. The noble Baroness further asked whether all those in the age group 15 to 50 will receive payment on 1st January, and what will be the position regarding the smaller groups. The first group, within the age 15 to 50, will be paid from 1st January 1976. Thereafter the speed with which age groups can be phased in will depend on the numbers eligible. Children aged 5 to 14 and adults aged 51 to 60 should be phased in by the second and third years, but greater speed may be possible, depending on the size of the problem. But I simply do not know at this stage. I was also asked what happens when a woman reaches the age of 60 or a man reaches 65. The beneficiaries who have reserved rights by being existing holders of three-wheelers or private car allowance will be able to revert; otherwise the allowance or the issue of the three-wheelers will cease.

The noble Countess, Lady Loudoun, raised a number of points, some of which I believe I have dealt with in answering the noble Baroness. The noble Countess asked what has happened to benefit for disabled housewives. The main non-contributory invalidity pension will start in November this year, as the noble Countess knows. The timetable for bringing housewives into the scheme is still uncertain. It is no good my pretending that it is to be implemented immediately. I accept the need to make this further advance as soon as possible, but I emphasise the importance of not trying to do everything at once, which could mean our getting into difficulties and probably not achieving as much as we should wish.

The noble Countess also asked why the allowance should be restricted to people under pension age. Most of us would be quite frank in this respect and admit that we regret the need to impose limitations; but having regard to our present financial difficulties we have been compelled to draw a line somewhere and we have felt bound to concentrate the available resources in helping the younger disabled. It is as simple as that. Why not include children from two to four years of age?—was another question put to me by the noble Countess. The short answer is that problems of mobility are somewhat less acute with younger children, and, rightly or wrongly, we felt that we ought to start with children of school age. My noble friend Lady Phillips talked about the make-up of the pension. This is a complicated matter. I found myself reading and re-reading it and then taking advice on it. The additional component is 1½ per cent. of the earnings above £11.60, the level of the basic component, over the 1¼ per cent. representing eightieths drawn over the contributor's best 20 years. The seven times referred to in the earnings is the ceiling which I said was just over £80 a week, for which no extra contributions are levied and no extra pension is earned. You get your basic component, and then take the best 20 years for which a person, either man or woman, will get twenty times 1¼ per cent.—making 25 per cent. which is one quarter of the average earnings of the best 20 years.

Baroness PHILLIPS

My Lords, may I say that the Minister makes it much clearer than the Bill; the Bill left out the word "years".

Lord WELLS-PESTELL

My Lords, only because the Minister himself did not understand it and had to read and re-read it and take advice. My noble friend raised the question: Can a woman rely on getting a return for her contributions? Any additional component which she has earned will be payable, whether her basic pension is based on her husband's or her own contributions. As a widow, she will get the additional components which both she and her husband have earned, subject to her getting no more than a single person who had contributed at the £80 a week level which is the maximum of the scheme; in other words, she can have only one basic component. She cannot have the two, but she will get both her own and her late husband's additional components.

The noble Baroness also asked me whether an earner can benefit from the State scheme and also a contracted-out scheme. A contracted-out earner will receive a basic level pension; that is the basic component from the State and a guaranteed minimum pension the equivalent of the State's scheme additional component from the contracted-out scheme, except that the basic component will be the State one. What they will get from the contracted out one will be the occupational pension scheme. I am trusting entirely to memory and perhaps I ought not to bring this in, but it may well be that the contracted-out scheme will be working on the basis of sixtieths rather than eightieths, though it amounts to much the same thing.

I really do not know what to say to the noble Lord, Lord Banks—he rather shook me. I thought at one time that he was damning the thing with faint praise, but on reflection I do not think that is so. I think we have a scheme which, like every other scheme, is not foolproof and not holeproof. We have to make the best of it. One of the rewarding things about it is that at least we are having a meaningful (I do not like that word, though it was the first that came to my mind) discussion with experts in the pension field from whom we have derived a good deal of information and expertise. Therefore the two together will be of considerable benefit. If it has merit at all, it is that there is this partnership to which we attach a great deal of importance—the partnership of a State scheme with the contracted-out scheme which so many firms have had in operation for many years and which, in spite of inflation and the problems we face today, they want to continue. In the circumstances this is probably ideal. To be honest with the noble Lord, I want to read what he has said, because in many ways he explored a new philosophy. Perhaps that is putting it a little too high, but I should like to read what he has said and consider whether there is anything which, even at this late hour, we can take out of it.

I am grateful to the noble Lord, Lord Sandys, for his contribution. We on this side of the House realise that there will always be an element of difference between us. Our basic philosophies are rather different, but as a House I think we tend to come together on matters of this kind. The noble Lord referred to 1909. I have just finished reading my third biography of Lloyd George. I think I have said before, and there is no reason why I should not say again, that we owe a great deal to the Liberal Party in this country. We on this side of the House like to think that the mantle of the Liberal Party has fallen on us, but I am sure noble Lords will not agree. Successive Governments have realised that a great deal has to be done for the community as a whole. Our emphasis from time to time has been slightly different, but in the long run we have gone along much the same road, sometimes perhaps a little faster than others. I am grateful to noble Lords for staying and for their contributions. I hope that the Committee stage and the Report stage will be as amiable as Second Reading.

On Question, Bill read 2^a, and committed to a Committee of the Whole House.